PALO ALTO NETWORKS REPORTS Palo Alto Networks® (NYSE: PANW), the next-generation security company, today announced financial results for its fiscal fourth quarter and fiscal year 2016 ended July 31, 2016.
Total revenue for the fiscal fourth quarter 2016 grew 41 percent year over year to a record $400.8 million, compared with total revenue of $283.9 million for the fiscal fourth quarter 2015. GAAP net loss for the fiscal fourth quarter 2016 was $54.5 million, or $0.61 per diluted share, compared with GAAP net loss of $46.0 million, or $0.55 per diluted share, for the fiscal fourth quarter 2015.
Non-GAAP net income for the fiscal fourth quarter 2016 was $46.2 million, or $0.50 per diluted share, compared with non-GAAP net income of $25.0 million, or$0.28 per diluted share, for the fiscal fourth quarter 2015. A reconciliation between GAAP and non-GAAP information is contained in the tables below.
“Fourth quarter 2016 was a very strong finish to yet another record fiscal year. Revenue for the year was $1.4 billion, up 49 percent year over year, our customer base expanded to approximately 34,000 customers, we extended our platform capabilities both with new offerings and strategic partnerships, and we established new routes to market while driving significant growth across our partner ecosystem,” said Mark McLaughlin, chief executive officer of Palo Alto Networks. “The security industry is seeing a rapid transformation from legacy hardware and point products to integrated and automated capabilities that seamlessly work together as a platform. As the primary innovator driving this paradigm shift, customers are turning to our Next-Generation Security Platform in record numbers to more effectively prevent cyberattacks no matter where their data resides.”
For fiscal year 2016, total revenue grew 49 percent to $1.4 billion, compared with $928.1 million in fiscal year 2015. GAAP net loss was $225.9 million, or $2.59per diluted share, in fiscal year 2016, compared with GAAP net loss of $165.0 million, or $2.02 per diluted share, in fiscal year 2015. Non-GAAP net income for fiscal year 2016 was $152.6 million, or $1.67 per diluted share, compared with non-GAAP net income of $75.2 million, or $0.86 per diluted share, in fiscal year 2015.
Steffan Tomlinson, chief financial officer of Palo Alto Networks, commented, “I am very pleased with our fourth quarter and fiscal year 2016 results, which once again demonstrate the competitive differentiation of our Next-Generation Security Platform and the power of our hybrid-SaaS model. In the fourth quarter, we delivered record revenue, billings and deferred revenue while generating $187.5 million in cash flow from operations and $171.2 million in free cash flow. We ended the fiscal year with approximately $1.9 billion in cash, cash equivalents and investments and are pleased to announce a $500 million share repurchase authorization.”
Palo Alto Networks provides guidance based on current market conditions and expectations.
For the fiscal first quarter 2017*, we expect:
For the fiscal year 2017*, we expect:
* This guidance reflects a change in accounting policy that we expect to adopt effective the fiscal first quarter 2017 related to sales commissions that are incremental and directly related to customer sales contracts for which revenue is deferred. Under this anticipated change in accounting policy, these commission costs would be accrued and deferred upon execution of a non-cancelable customer contract, and subsequently expensed over the term of such contract in proportion to the related revenue. We anticipate this change to have no material benefit to fiscal first quarter 2017 guidance as the vast majority of the benefit occurs in the second half of fiscal 2017 due to the timing of accelerated commission payments.
Guidance for non-GAAP financial measures excludes share-based compensation related charges, including share-based payroll tax expense, acquisition related costs, amortization expense of acquired intangible assets, litigation-related charges, including legal settlements, non-cash interest expense related to our convertible senior notes, the foreign currency gains (losses) and tax effects associated with these items, and certain non-recurring expenses. We have not reconciled diluted non-GAAP net income per share guidance to GAAP net income (loss) per diluted share because we do not provide guidance on GAAP net income (loss) and would not be able to present the various reconciling cash and non-cash items between GAAP net income (loss) and non-GAAP net income (loss) without unreasonable effort. Share-based compensation expense is impacted by the company’s future hiring and retention needs and, to a lesser extent, the future fair market value of the company’s common stock, all of which is difficult to predict and subject to constant change. The actual amount of share-based compensation in the fiscal first quarter and full fiscal year 2017 will have a significant impact on the company’s GAAP net income (loss) per diluted share. Accordingly, a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure is not available without unreasonable effort.
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On August 26, 2016, our board of directors authorized a $500 million share repurchase. This authorization allows the company to repurchase its shares opportunistically and will be funded from available working capital. Repurchases may be made at management’s discretion from time to time on the open market, through privately negotiated transactions, transactions structured through investment banking institutions, block purchase techniques, 10b5-1 trading plans, or a combination of the foregoing. The repurchase authorization will expire on August 31, 2018, and may be suspended or discontinued at any time. The company had approximately 90.5 million shares of common stock outstanding as of July 31, 2016.